Tuesday, April 23, 2013

Here are some questions to consider: What do the Wall Street firms do that is so vital for the national interest? How does speculation contribute to our society? It’s time for Wall Street to step up and provide some answers.

The reckless actions of Wall Street institutions led to the collapse of the the U.S. economy and the deep recession of 2008-09. The Wall Street firms looted and gambled trillions in worker pensions and mutual fund savings. The Wall Street traders made billions of dollars in speculative money — bets on bets — holding hostage the real economy where money is made by providing goods and services. And the actions of Wall Street resulted in the loss of more than 8 million jobs.
Despite all the lasting harm caused by the casino capitalists, the big banks are now bigger, richer and more powerful than they were when they were bailed out in late 2008. The only ones who were punished were the U.S. taxpayers, who footed the $600 billion bill for the excesses of Wall Street. Brazenly, many firms still continue to gamble with other people’s money.

Something needs to change. One necessary change lies in a financial transaction tax — often referred to as the “Robin Hood Tax.” The Robin Hood Tax movement began in the United Kingdom in 2010 with the support of hundreds of economists, prominent public figures and social justice organizations.

Yesterday, Rep. Keith Ellison (D-Minn.) reintroduced The Inclusive Prosperity Act — inspired by the Robin Hood Tax. If passed, the bill (H.R. 1579) would create a minuscule tax on the purchase and sale of derivatives, options and stocks. The tax would be small, half a percent or less of the transaction value, depending on the product. This amounts to half a penny or less per dollar.

Consider this fact: American consumers in most states pay sales taxes on the necessities they purchase — cars, appliances, clothes, etc. The rate of such sales tax is, in some areas, as high as 7 percent. For example, a schoolteacher or police officer who buys a $100 pair of shoes pays up to $7 in sales taxes. Most people accept the idea of paying such a tax. But what about the folks on Wall Street? A trader can buy and sell millions of dollars of financial products each day without paying a cent in sales taxes. Why should financial transactions be exempt from a small sales tax?

A financial transaction tax could raise $350 billion annually — money that could be used to repair critical infrastructure, create decent paying jobs, reduce the tax burden on individuals and start to rein in frivolous high-volume trading.

At the news conference announcing the legislation, Rep. Ellison said: “This is a small tax on financial transactions that will allow us to meet the needs of our nation. And didn’t America step up, on very short notice, for Wall Street when it needed help? Well, now the American people need help.”

Critics of a financial transaction tax have all sorts of excuses. They argue it would harm ordinary investors; it wouldn’t, there are protections in place for small investors. Some say it would drive trading to offshore tax havens; but forty countries already have such a tax in place with little compelling evidence showing an adverse effect.

It’s obvious that the casino capitalists won’t give an ounce of their moral obligation without a fight. However, the endorsement of more than a thousand economists speaks volumes. One supporter, the Capital Institute’s John Fullerton (a former managing director at JPMorgan), has stated that a financial transaction tax could have significant impact in lessening the use of high-frequency trading. He has estimated that nearly 70 percent of equity-trading volume falls under this category of highly speculative trading. In June 2012, Fullerton and over 50 other financial industry professionals wrote a letter to the G20 and European leaders advocating for small financial transaction taxes.

The United States had a financial transaction tax from 1914 until 1966. It imposed a tax of 2 cents on every $100 sale or transfer of stock.

The question I posed at the outset was: What does Wall Street do that is so vital for the national interest? To begin to answer it, they can start paying this small tax. As the Robin Hood tax website succinctly puts it with their slogan, it would be “small change for the banks and big change for the people.” The $350 billion raised annually with a financial transaction tax would go a long way in helping American workers and bolstering the economy.

If you agree, stop practicing futility. Show a civic pulse. Write and call your Congressional Representative. Tell them you support “The Inclusive Prosperity Act” and they should support it as well. National Nurses United, the largest union and professional association of registered nurses in the United States, has already done this and much more with their national Robin Hood Tax campaign.

The nation is now considering cuts to Social Security that would take away a week’s grocery money from elderly women, many already living at the margins. They will join some of the nation’s children eating less, as 10 percent of U.S. households with children are “food insecure” during the year, according to government data. Last month the percentage of men in the workforce aged 45 to 54 reached its lowest point on record. Cuts to housing subsidies are expected to add 140,000 families to the ranks of the homeless next year, on top of the growing numbers of homeless young adults. Sharp increases in risk of heart attack linked to unemployment are now being reported, as well as rising numbers of suicide attempts tied to foreclosures. Nurses see more children with stress disorders normally associated with the adult population. Children, young adults, middle-aged Americans and the elderly are linked together in a downward spiral.

That’s why nurses helped organize the U.S. Robin Hood Tax Campaign, now with more than 140 endorsing organizations, and are supporting the “Inclusive Prosperity Act,” H.R. 1579, reintroduced by Rep. Keith Ellison (D-MN) last week, legislation that embodies Robin’s goals and principles.

The Ellison bill is a small sales tax on Wall Street trading—0.5 percent on stocks, 0.1 percent on bonds and .005 percent on derivatives and other trades. This financial transaction tax (FTT) could raise hundreds of billions of dollars in revenue in the U.S. each year, a feasible amount that can make a very real difference.

The new revenue would serve the entire nation, creating millions of new jobs by rebuilding infrastructure and transitioning to a cleaner environment, providing quality healthcare and schools; subsidies for housing, child care, student tuition assistance and to secure the social safety net. The measure also calls for stepped up funding for international efforts in HIV/AIDS treatment and research and to address climate change.

For millions of Americans the recovery promised after the bank bailout of 2008 simply never materialized. But prosperity did return to the financial institutions made whole with our tax dollars. For them, last year was the second best on record, behind 2006. “We are the richest nation in the history of the world – richer now than we’ve ever been,” wrote former Labor Secretary Robert Reich last month. “But an increasing share of that wealth is held by a smaller and smaller share of the population….” The 1 percent owns fully half the country’s stocks, bonds and mutual funds. The bottom 50 percent, in contrast, own just 0.5 percent of these investments. The tax falls on those who can well afford it.

We all pay sales tax on shoes, school supplies and SUVs, but financial transactions remain untaxed. “Everyone shopping on Main Street today pays sales taxes when they buy things,” said University of Massachusetts-Amherst economist Robert Pollin. “It’s time for Wall Street traders to face up to similar obligations.” Pollin is one of the more than 1,000 economists who endorse an FTT, as do some of our nation’s leading business executives.

There are other very significant reasons to join Robin Hood in supporting H.R. 1579. The markets are dominated by high-frequency trading– some estimates put it as high as 70 percent of market activity. The new tax aims to put a brake on these trades, which have caused financial bubbles, market crashes and the sidelining of capital that ought to be put to productive uses. And the Ellison bill lowers costs in fuel and food, tied to speculation.

Economist Pollin and others underscore new revenue would serve to raise confidence in the economy overall and induce corporations to invest some of an estimated $2 trillion they are holding in their coffers, capital that would speed a national recovery.

The Ellison bill will add the U.S. to the ranks of nations already collecting financial transaction taxes. Twenty-three nations, and all the major exchanges outside the U.S., collect these taxes. (Americans trading abroad pay these taxes to the treasuries of other countries.) Next year, 11 European countries – France, Germany and Italy among them – will together institute an FTT. “There is now a historical opportunity for the international community to join forces,” wrote Philippe Douste-Blazy, Under-Secretary General of the UN this year. “The successful ‘Robin Hood Tax’ campaign shows that an FTT has enormous grassroots support around the world.”

The time is now for the U.S. to join these forces, support H.R. 1579 and let the national healing begin.